Why retailers are dropping the price of beauty products

One of the last bastions of full-price retailing, department store cosmetics counters have long resisted discounting pricing. Macy’s began offering lower makeup prices during the spring of 2017.

Bloomingdale’s soon followed suit. However, these big retailers are discounting beauty products using two different strategies. Macy’s offered a 15 percent discount on nearly all its cosmetics and fragrances. Meanwhile, Bloomingdale’s limited its offer to returning customers who were given a $25 loyalty card for every $100 purchase of beauty products. Lord & Taylor eventually followed the lead of Macy’s with a 15 percent discount of its own.

So, What’s Going On?

There was a time when shoppers only had one choice when it came to get high-end cosmetics. The prestige department store makeup counter had long held sway over this very lucrative market. In recent years, the rise of cosmetics retailers like Sephora and Ulta upended the business model in this category. These stores focus specifically on makeup, which means they can offer selection on a vast scale. They also give the customer an opportunity to try products before they buy them. Department store cosmetics counters cannot match these attributes.

Appealing to A Changing Demographic

Another shift has been in the degree of brand loyalty contemporary shoppers demonstrate in this area. Older customers have already found the brands they like and tend to stick with them. Younger shoppers, who are still in discovery mode, find the limited selection at cosmetics counters confining. Further, they almost always must wait for help from a sales associate just to try a product. Meanwhile, they can wander into one of the makeup specialty stores and experiment on their own to their heart’s content. Older customers who want to just get what they know and go are bewildered by all the offerings in that environment. But younger customers look upon these stores as playgrounds of color and as a result, they aren’t really embracing brand loyalty the way older customers did.

And Yes, The Internet

Online sales of makeup from small retailers, some of whom even sell makeup from home, have also eaten into the market. These sites are typically supported by YouTube beauty tutorials, which have all but negated the need for a makeup artist to help shoppers figure out how to best apply products. With lower overhead, online retailers can offer lower prices, even while providing generous return policies. Plus, they can afford to provide the gift with purchase offers that have long been a staple in this area of retail sales.

If You Can’t Beat Them…

In addition to lowering prices, the big retailers are adapting elements of the makeup stores’ strategies. One move is to make beauty and skin products more accessible without sales associate intervention. Some have even brought the standalone makeup stores into their operations. JCPenney hosts store-within-a-store Sephora locations, while Macy’s has bought beauty and spa company Bluemercury and incorporated its offerings within its stores. Macy’s is also opening standalone Bluemercury locations to compete head to head with standalone makeup stores.

Still, it’s a Slippery Slope

Big retailers are discounting makeup but competing on price almost always means less profit for everyone. Further, discounting prestige brands tends to tarnish their hard-won golden halos. What’s worse, seeing luxury products offered alongside lower-priced brands in makeup superstores could further erode their allure. After all, shoppers can now compare them directly against products with lower price points. This usually ends badly for luxury brands, as their differences are revealed to be marginal at best. While all of this adds up to a more favorable marketplace for consumers, it means trying times for retailers.